Socioeconomic Change Requires Real Entrepreneurs

A term I’m hearing more and more of these days is “social entrepreneur.” In the simplest of terms, these are people who seek to generate “social value” rather than profits, using traditional business principles to create and manage a venture to make social change.

On the surface, this sounds like entrepreneurs who want to build a nonprofit organization. Yet the term seems to be more often associated with people whose work is targeted toward long-term socioeconomic change. Think Margaret Sanger (birth control) or Mahatma Gandhi (non-violent), as opposed to the leaders of the Cancer Society or Goodwill Industries.

Whether the objective is to generate profits or social capital, the common element for all entrepreneurs is the recognition that there is a problem which needs solving, or that there is an opportunity to improve the status quo.

The vision is always to be a change agent, to invent and popularize new approaches, and to persuade people to take a leap forward. In every case, this requires a committed ultimate realist with the determination to persist in the face of daunting odds.

Another way to distinguish between the two types of entrepreneurship is by identifying what social entrepreneurship is not:

Not a fundraising strategy for nonprofits. A social enterprise may actually be profitable, or it may be non-profitable, but the generation of funds is deemed secondary to success on the environmental or social issues in the vision. Generating funds should not be the highest priority.

Not about profit before social impact. A social enterprise must be financially sustainable only as a means to the end, which is its social or environmental impact and rate of change. The business entrepreneur mission is profit always, social impact maybe.

Not a new definition for the nonprofit sector. The evident and real purpose of the social enterprise must be to make the world a better place through the operation of the business. This certainly also has potential for enhancing the vitality of the nonprofit sector, but it doesn’t move it to a higher moral plane.

Not an investment opportunity for business investors. I still get inquiries about how to find angel investors and venture capitalist to kick-start a social enterprise. Funding such an enterprise is in the realm of philanthropists, government grants or bootstrapping. Business investors are looking for a financial return, not a social capital return.

Not about entrepreneurship in the government sector. So far, the largest source of services and funding for social enterprises and social entrepreneurs has been federal, state and local governments. Yet the enterprises are not government enterprises, and the process for success makes them good business enterprises.

Social entrepreneurship is not socialism. The socialist doctrine dictates compulsory taxpayer contributions to finance social initiatives, while the social entrepreneur uses the standard business model and innovative approaches to attract customers, fund activities, and accomplish social change.

In all types of entrepreneurship, an entrepreneur is required, rather than an administrator. This is someone who is willing and able to create a new enterprise based on an innovative idea, and is willing to assume total accountability for the inherent risks and outcome.

So, if you are an entrepreneur at heart, but you are driven by a higher cause than making a profit, social entrepreneurship may be for you. It is an emerging field with diverse and shifting interpretations, but most agree it’s really about making the world a better place. There is certainly plenty of opportunity in that space.

Martin is the CEO & Founder of Startup Professionals, Inc., a consultancy focused on assisting entrepreneurs with mentoring, business strategy and planning, and networking.

Martin for years has provided entrepreneurs with first-hand advice, mentoring and business plan assistance as a startup consultant. He has a unique combination of business and high-tech experience, and executive mentoring and connecting startups with potential investors, board members, and service providers.

AF

You say that social enterprise isn’t an investment opportunity for business investors…but what about impact investing? Impact investors look for both the social outcome and the financial return. Also an emerging field, yes, but I think it’s important to note in relation to social enterprise.

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